The most important employee representative body is the Works Council (Betriebsrat). In establishments with more than five regularly employed employees who are eligible to vote, a works council can be elected. The works council is elected for a term of four years. In general, elections take place throughout Germany in all businesses every four years from March to May. The size of the works council depends on the number of employees regularly employed in the establishment.
The formation of a works council is not mandatory for employees. The initiative for creating it must come from the employees or the unions. If a company has more than one branch, it is generally possible to create a works council for each separate branch, provided that it has five or more employees.
In practice, works councils are set up especially in medium size and big enterprises, and much more rarely in small enterprises: In Germany, works councils are organized in 97.5 per cent of establishments employing more than 1,000 workers, but only in 4.2 % of establishments employing from 5 to 20 employees.
The works council has general information and consultation rights under the Works Constitution Act. The works council is obliged to ensure that all laws, rules and health provisions are applied correctly and to the benefit of the employees. To perform its duties, the works council must have an established dialogue with the employer. The employer and the works council can agree on works agreements, which are binding on all employees.
A works agreement is a special type of contract concluded between the employer and the works council containing general provisions regarding the working conditions of the individual employees. Works agreements have the same direct and binding effect on the individual employment relationships as statutory law.
The Works Constitution Act provides co-determination rights, which concern personnel, social and economic matters. Co-determination rights regarding personnel matters are, for example:
- Individual personnel matters (for example: hiring, transfers to other job positions, regrouping of employees and termination of employment).
- General personnel matters (for example: information on staff planning, and consent to employees’ questionnaires).
Regarding social matters, the works council has powerful co-determination rights, in particular in relation to:
- Policies relating to the order and conduct of employees
- Regular start and end of the working day and the allocation of working hours
- Introduction and usage of technology (telephone, mobiles, laptops)
- Implementation or changes to an operational pay scheme
The works council must consent to the implementation of these measures.
In respect of economic matters, for example in the case of significant restructuring measures the employer must inform and consult the works council prior to the implementation of the measure.
By law, the employer must bear all costs of the works council to the extent they are necessary for the performance of its duties. This includes providing the works council with offices, equipment and in larger organizations – even part-time or full-time staff. The law explicitly stipulates that the employer must provide the works council with information and communication technology.
The trade unions play a vital part in German politics. There is no trade union law in Germany. Even though trade unions are generally defined as associations with no legal capacity, they are legally entitled to collectively bargain as well as to take legal action or to be taken to court. Members are obliged to pay union dues, of which the amount is based on the individual wage level. At the same time, they are entitled to support in labor disputes as well as to legal advice. The membership only ends by termination at the worker’s initiative or by exclusion on the basis of the trade union’s decision, which must be in accord with its constitution.
Most collective agreements are negotiated at the branch or industry level.
Employers’ associations represent the employers’ interest vis-á-vis the trade unions. Many of the regional associations are industry-based and the same branch is finally merged in an association at Federal level. The Federal associations of the different branches are unified in the two most important central confederations, the Confederation of German Employers’ Associations (BDA) and the Federal Union of German Industry (BDI). The BDA represents the enterprises’ interest as an employer, whereas the BDI seeks to further their economic and political interests.
Collective Bargaining and Agreements
The legal capacity to collectively bargain is possessed by the trade unions on the one hand and the employer’s associations as well as the individual employer on the other. In fact, collective bargaining mostly takes place at the branch level, even though, in some cases, trade unions may also bargain with the individual employer, provided that it is permitted by their constitutions. A prohibition of the employer’s organization against individual collective bargaining of its members does not affect the validity of the collective agreement but results in the employer’s duty to pay damages.
Collective agreements have three characterizing functions:
- a protective function (setting minimum labor standards)
- a rationalizing function (putting working life in order and alignment)
- a peacekeeping function (as long as the collective agreement remains in force new demands and labor disputes about included topics are absolutely banned)
Article contributed by Peter Fürnthaler
This article is meant to provide an overview on the most important rules and provisions. It can, of course, not be a substitute for in-depth legal advice, but might serve as a starting point for those interested in the German marketplace and employment laws.